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Coffee means business: a view from Vietnam

Coffee means business: a view from Vietnam

Jessica Summers  Dec 21, 2015

It may be the birthplace of coffee, but Ethiopia’s coffee farmers are often worse off than their international counterparts. Dr Tran Minh Tien, deputy director general, Soils and Fertilizers Research Institute, Vietnam explains how his country’s coffee farmers do business. Can Ethiopia’s Commodity Exchange – together with increased balanced fertiliser use – improve farmer’s lot?

In 2013, Vietnam exported more than 1.6 million tonnes of coffee beans. This earned approximately US$3.4 billion from total production. And the industry is growing: “In 1995, we had around 200,000 hectares (ha) but now we have more than 620,000 ha. The sector employs around 2.6 million people,” states Dr Tien.

Today Vietnam is the world’s second largest coffee exporter. Its market share is 20% - up from just 0.1% in 1985.<

Average yield for Vietnamese Robusta coffee is 2.5 tonnes per ha and - can be as high as 4 tonnes per ha of good quality green coffee beans in areas where fertilisers are ‘over-used’ by Ethiopian standards. It is estimated that Vietnamese farmers use on average 600kg of fertiliser for coffee per ha per year whereas in Ethiopia, coffee farmers use about 40-50 kg per hectare per year. Interestingly, as Dr Tien notes, “As coffee prices increase, farmers invest more in fertilisers. Increased fertiliser use enables farmers to grow more and earn higher incomes when markets are good.”

Speaking at the International Potash Institute’s (IPI) sub-Saharan symposium held in Ethiopia in November 2015, Dr Tien presented a compelling study which showed correlation between individual farmer’s income and potash (potassium) fertilizer use. “Coffee is very important. We apply a lot of fertilizer. Selecting appropriate application amounts is crucial because we need to achieve balance – for the environment and also farmers’ needs to benefit and save money. But if we don’t apply them, yields decrease and benefits are lost. Soils need potassium, which has also increased farmer profits up to 100% in our trials!”

In contrast, Ethiopia’s export earnings have steadily declined since 2009 from US$842 million to US$780 million last year (2014/15). Ethiopia is Africa’s top coffee producer and the world’s seventh largest. There are key differences between Ethiopia and Vietnam as coffee growers: type of coffee grown, land altitude, soil fertility and access to quality and appropriate amounts of fertilisers.

Robusta is easier to grow. It produces a higher yield and is less sensitive to insects because higher caffeine content acts as an insecticide. Yet Arabica green beans – grown in Ethiopia - are worth double the price of Robusta on the commodity market. Arabica coffees have a richer taste and are higher quality – “Ethiopian coffee is a speciality,” says Ermias Eshetu, CEO of the Ethiopian Commodity Exchange (ECX).

So why are farmers of lower-grade Robusta in Vietnam doing better? “I can only talk about Vietnam but a particular trend springs to mind: that is farmer’s access to mobile phones and SMS information about market prices,” says Dr Trien. “Coffee farmers are closely linked with worldwide markets – they understand the high value of coffee. The other component is fertiliser access and use to participate in those higher earning international markets.”

Realising Ethiopian potential: from price takers to makers

Nevertheless, there are promising developments taking place in Ethiopia.

On the technology side, ECX’s SMS service is now providing global coffee bean prices directly to Ethiopian farmer’s mobile phones. This enables them to make more informed decisions to get better prices for their coffee. Every month ECX is getting a million SMS requests on the global price of coffee from smallholder farmers, says Eshetu.

On availability and access to fertiliser, the country has established the first of five local blended fertilizer production plants in June 2014; all five are now operational. “This means that farmers in Ethiopia, including coffee growers, will have access to custom-made fertilisers; it is just a matter of one or two years before all farmers switch to this scheme and increase their crop productivity by higher margins,” explains Professor Tekalign Mamo, program leader, EthioSIS and UN special ambassador for the 2015 International Year of Soils.

Results from the nation-wide @40,000 new fertiliser demonstrations - including potash - implemented by the Ethiopian Ministry of Agriculture and Natural Resources and the Agricultural Transformation Agency showed that yields increased by as much as 100%. Before, Ethiopian coffee farmers used little or no fertilisers, and if they did, they were limited to DAP and urea, fertilizers that only delivered nitrogen and phosphorous nutrients. “We know now that potassium and other essential nutrients are deficient in Ethiopian soils and are greatly needed. Farmers have started to ask and we are delivering,” says Professor Mamo.

Finally, what about better linkages between coffee farmers and markets? For Ethiopia’s coffee growers, is it about changing the value chain as much as mind-sets?

Ethiopia’s recent efforts to link coffee farmers to speciality markets for premium prices looks promising.  Recent reports show that coffee farmers in Ethiopia were getting less than 10% of the profit from their beans; sold for up to US$3 per cup in coffee shops abroad. Yet according to Ermias, there’s potential for farmers to set prices and access speciality markets.

Part of this is the recently announced ECX’s IBM-enabled national traceability system, known as eATTS.  The system taps into growing consumer awareness of commodity origin, quality and environmental credentials. Promoting transparency and accountability within supply chains – by tagging each bag of coffee traded through ECX – will also help improve coffee bean trade and Ethiopian coffee farmers’ access to markets; creating the value they deserve.

 

 


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